This Is What European Banks' Loan-To-Deposit Ratios Look Like

For those who feel like spreading rumors about European deposit insurance, please do. But at least have some sense about what it would entail. European banks already have the highest loan-to-deposit loan-to-deposit ratio in the world. This means they are massively more levered, roughly 3x more, the US banks. In other words, deposit "encumbrance" is already absolutely maxed out. Think the ECB can credibly backstop Europe's €11 trillion deposit market, with Germany's agreement? Good luck.

Actually, there is one more thing. Deposits, or specifically, the Loan to Deposit Ratios of European banks. The chart [above] explains why not only is Europe's several asset constrained, it is also running out of funding, in the form of depositor cash: the most critical bank liability. Remember: without incremental deposits, banks can not invest in new assets, unless they generate cash from operations, and thus grow shareholder equity. There is a problem: as the final chart below shows, Europe, and especially Scandinavia which has consistently remained off the radar, is literally off the charts when it comes to LTD ratios.

With banks such as Danske, SHB, Swebank, DnB, and Nordea literally at 200% Loan-to-Deposits, but most other European banks too, even the tiniest outflow in deposit cash (ala what is happening in the PIIGS) will send the system into yet another liquidity spasm. Only this time, since what little unencumbered assets remaining have already been pledged to the ECB, there will be no quick LTRO collateral-type fix this time.

And judging by the market's reaction today, more muppets, pardon, people are starting to grasp this.

Alas, we were too quick to judge the muppets, which continue to fall for every BS rumor over and over.

I mention Snorgtees ads so hopefully the Tyler's bots post those instead of the 2012 Kenyan and his Wookie 2012 banner ads. I think they need more SnorgTee gals in t shirts and panties like the one chick.

You forgot gulping down 500 large of LNKD floating turds at 700 P/E... In about 400 years, they payback what they made in the IPO if they don't dilute the stock anymore... as Schoenberger says, SCREAMING BUY!"

It is the classic problem of insurance when attempts are made to insure large numbers of relatively small risks ( such as individual banks in a banking system) but the individual risk units are not independent)

Auto insurance is a good example. There is little risk of all cars in the usa having a wreck at the same time. One group of wrecks does not form a cascade that causes all other vehicles in the usa to crash. Cars, ships, satellites, lives, and lost packages do not correlate closely with each other

Where individual units of a system rise or fall as a whole then insuring individual risk is unwise since no insurance scheme could ever bail out the entire system

Perhaps you can insure against ACCIDENT--like some bank makes a bad loan and ends up overextended. You can't insure against institutional fraud--banks making hundreds of thousands of KNOWN-BAD loans because they knew they could sell them off before they failed.

Deposit insurance didn't have anything to do with any of this.

I dunno, there's nothing to argue about here, you're just making crazy shit up.

Given that Europe had been following US lead since Draghi came into the ECB, I actually think the rumors make sense. The US raised deposit insurance 2.5 times! to 250k USD. Seems Europe is in desperate need of a pan-european deposit insurance. Also, it wouldnt need to cover all 11Trillion of Deposits. It would be geared to the small bank accounts, stopping the plebs from fleeing in panic and rioting. Rumor or not, this would be the equivalent of LTRO3.

Loan to deposit ratios understate the reality of the liquidity situation. Deposit to Liquid Cash ratio is really the thing to look at when people are pulling deposits. It's great that your haven't loaned the deposits out, but what did you do with the cash instead? Buy treasury bonds (and not call it a loan to the government)?

loan to deposit sharks, all you need is to throw them a leg and they'll go berserk. WHose leg should we throw them to see the mayhem go from red to purple? Maybe a leg of Greek left guy; if he ever makes it to the top of the heap in June, you can see these banks going yellow around the gills. Melon yellow, like lemon green and Limewire blues.

Some of the local branches have even pulled the plug on dealing with paper money... instead you've got deposit + withdrawal ATM's, and for all other purposes you get instructed to use the internet bank or call their operators.

It is called rent - pretty much. In the USA - even if you pay your house off - you are a slave to the govt union workers who work for the county. You are paying for their golden pension and you get a golden shower.

Only this time, since what little unencumbered assets remaining have already been pledged to the ECB, there will be no quick LTRO collateral-type fix this time.

You can trust the banksters to find a way to print collaterable assets. They won't let the system crash due to lack of money, so it'll be unlimited liquidity flooding the systemic relevant rats, balanced by tight austerity for the working class.

BBC Newa finaly giving some airtime to the class action being brought againt UK Banks for miss selling Interest rate swaps to small businesses with mortgages. Speculation that the compensation bill will top £10bln, judging by the coverage its not going to be an easy brief acting as defence council. The banks here dont quite own the treasury select commmittee or judiciary to the extent apparent in the US, they will seek to settle out of court (without admital of wrong doing) but it will be a big bill. The bigger the better.

I am a strong supporter of outsourcing responsibility. It is efficient, and the bonus is, it allows our neighboring countries to boot-up their own prison-industrial complex. It's our best hope for a new Marshall Plan: export the prison state.

The state need not have anything to do with anything. We could just all agree, say, that this is the fault of Paraguay, and we expropriate the assets and turn the citizens into a global gulag. It could be quite pleasant. Uruguay could provide staffing.

Loan to deposit? Hell most of them have only 1% or less in cash available. Any 2-3% total money run on a bank will crash it. Europe, US or almost anywhere in the world. They don't even have the supposed 10% cash on hand like they are supposed to.

If I wanted to 'leverage up' with one or two bearish stocks/ETFs between now and mid June, what would be the best options? What stocks in the Vix group would be most suitable? FAZ is probably something I'll strongly consider. Also will be looking into mining stocks and some PSLV if it finds some sort of bottom after this plunge. Would the VXX be appropriate? And it's just buy and hold-no options.

Between now and mid June is the focus but I guess I'd also say I'd expect some volatility thru summer and into the fall with the debt ceiling. Any thoughts appreciated, and I'm very conservative minded so no worries; I'm just looking for some strategies.

think the chart is missing something jsut as junk like, that is, it excludes government debt since that is not treated as a loan? you might have to redraw the left hand axis up another 30% or so.PLUS, there are derivatives, hence no counterpary risk of leninding by banks to other banks, since these are probably not loans either, nor are investments in non-Government bonds? do "loans" mean secured financing to companies or unsecured financing to ummm..monkeys?..and what kind of numbers have BNY and NT loans to deposits at 30-40%??? looks like incomplete analysis and hence gibberish to me.